Improving liquidity through efficient stock market structure and operational design
AbstractThis study is an analysis of the secondary market liquidity on equity markets around the world. The role of operational design of stock exchanges in enhancing liquidity is assessed. The market structure within which exchanges operate is also shown to affect the optimal operational design and liquidity. Narrower tick sizes, designated market makers, centralized limit order books, computerized trading, and strong shareholder rights index all improve liquidity directly and indirectly. Interaction effects among these features result in hybrid auction-dealer systems outperforming pure limit order books or quote-based dealer systems in the race for better liquidity.
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Bibliographic InfoArticle provided by Capco Institute in its journal Journal of Financial Transformation.
Volume (Year): 18 (2006)
Issue (Month): ()
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liquidity; international; stock exchange; trading mechanism;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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